Property prices in South Africa have been on an intense roller-coaster ride in the last 10 years or so, with politics, the global economy, and new credit legislation all factoring into the rise and fall of South African property value figures. Let’s have a look at what’s happened and why.
In the wake of five years of an emergent black middle class with money to spend and the desire to own property, as well as capital gains tax exemptions, the early years of the new millennium saw a massive increase in the demand for property. The economy was growing rapidly and another driving factor was the money that had been stored offshore during apartheid, now being returned to the country.
The glory days
By 2003 and all the way through to 2006, property prices increased by 20% per year, peaking in 2004 at around 35%. Profits from real estate skyrocketed and the industry boomed.
In the middle of 2007, the new National Credit Act was implemented to protect people from over-extending on their credit. It directly led to fewer home loans being approved. Interest rates shot up during the time that the global economy began to decline, and suddenly the property market wasn’t looking so hot any more, especially with the global crisis in full swing by the end of 2008.
Current market trends
The 2010 FIFA World Cup created renewed interest in South Africa’s property market, and for the last three years house prices have risen and fallen modestly again between 2.6% and 3% between 2010 and the early quarter of 2012.
The property market over the last few years has not really been affected by inflation, with interest rates decreasing between 2008 and 2010, and remaining stable at 9% since 2011; however, inflation is expected to catch up with the market late in 2012.